Last month, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued joint guidance to human resources professionals, cautioning that they (and their companies) risk violating federal antitrust laws when they agree with competitors to set wages or not recruit each other’s employees. Sounding the alarm, DOJ and FTC made it abundantly clear that illegal “wage-fixing” and “no-poaching” agreements between competing employers could be pursued both civilly and criminally.
We covered this development in our Oct. 27 alert “Raising Red Flags: DOJ and FTC Issue Antitrust Guidance for HR Professionals.” As noted there, the recent guidance follows high-profile settlements involving several Silicon Valley technology companies, resolving allegations accusing them of entering into agreements not to “cold call” (and in some cases not to hire) each other’s employees.
While it is important to consult legal counsel on any agreements that may fall within the guidelines issued by DOJ and FTC, some provisions are less likely to raise competitive concerns. For example:
- A no-direct-solicitation provision (e.g., a provision prohibiting cold calling, soliciting, recruiting or otherwise competing for employees) is less likely to raise an issue if it is reasonably necessary for, and thus ancillary to, legitimate pro-competitive collaborations.
- No-direct-solicitation provisions contained in existing and future employment or severance agreements with employees also may be less likely to raise anti-competitive concern, since an employee is not in a horizontal position with his or her employer. The recently issued guidance specifically declines to address employer/employee agreements.
Additionally, provisions regarding no direct solicitation may not be challenged by DOJ or FTC if they are:
- reasonably necessary for and ancillary to mergers or acquisitions (consummated or unconsummated), investments, or divestitures (including due diligence related to such activity);
- contracts with consultants or recipients of consulting services, auditors, outsourcing vendors, recruiting agencies or providers of temporary employees or contract workers;
- contracts with resellers or original equipment manufacturers (OEMs);
- contracts with certain providers or recipients of services; or
- the function of a legitimate collaboration agreement, such as joint development, technology integration, joint ventures, joint projects (including teaming agreements), and the shared use of facilities.